A planned condominium tower near Ala Moana Center has obtained a key state approval to rise without respect to height, density and other city zoning regulations — despite city objections — as a trade-off for being predominantly affordable to moderate-income residents.
SamKoo Pacific LLC, developer of the 485-unit tower dubbed Kapiolani Residence, obtained 10 exemptions to city zoning rules Thursday from the board of the Hawaii Housing Finance and Development Corp., a state agency that facilitates affordable-housing development.
The 8-0 board decision puts the $225 million project on schedule to break ground in May pending City Council approval. SamKoo, an affiliate of South Korean-based SamKoo Corp., also is seeking a $25 million loan from HHFDC. If construction begins as anticipated, completion is projected for April 2018.
Kapiolani Residence is the latest tower to receive exemptions or variances from city or state development rules. Others include the Holomua condo, which was built higher than allowed at 1315 Kalakaua Ave. in Makiki as an HHFDC-approved affordable-housing project; the low-income senior rental apartment complex Meheula Vista being developed on land zoned for commercial use in Mililani Mauka; and two towers at 801 South St in Kakaako that received a 100 percent density bonus under a Hawaii Community Development Authority affordable-housing rule.
SamKoo committed to make 292 units, or about 60 percent, of Kapiolani Residence units affordable to households earning no more than 120 percent of the annual median income for Honolulu. That equates to $80,520 for a single person and $114,960 for a family of four under HHFDC calculations.
Maximum prices for affordable condos ranging from studios to three-bedroom units would be $383,700 for a single person and $547,800 for a family of four if they were sold this year, under HHFDC guidelines and assuming a 4 percent mortgage interest rate.
Mary Alice Evans, an HHFDC board member and deputy director of the state Department of Business, Economic Development and Tourism, said the production of such affordable housing merits the exemptions.
"It is a great location for housing and affordable units," she said. "More housing is desperately needed on Oahu."
City Council Chairman Ernie Martin also endorsed the plan in an Aug. 17 letter to the developer. "I support the project and the requests made for the exemptions and deferrals needed to achieve financial feasibility," Martin wrote.
The city Department of Planning and Permitting, however, has raised concerns and objections over some of the exemptions that will cost the city more than $15 million.
One particularly valuable exemption is waiving a park dedication fee. Under a formula tied to the project’s building density and land value, SamKoo would have to contribute nearly an acre of land or $14.3 million for park space. The developer is building Kapiolani Residence on a 1.3-acre site that it bought in 2007 for about $15 million.
DPP officials said in a July letter that part of this exemption, a portion representing the project’s 193 market-priced units, isn’t warranted.
Lowell Chun, a SamKoo consultant and president of Honolulu-based Pacific Catalyst LLC, responded to DPP that the suggested partial exemption would result in a $7.3 million fee that would still be prohibitive to the project’s feasibility.
"It is economically infeasible, given the project’s financial constraints," Chun said in the written response. He also added that there are five public parks within a half-mile or so of the project site along with nearby health clubs available to residents.
Other monetary exemptions approved by HHFDC include waivers of a $659,915 building permit fee and a $25,000 plan review fee.
Exemptions to building design rules will allow Kapiolani Residence to be built taller, more densely and closer to some streets or property lines.
SamKoo may build its tower 400 feet high. That’s 50 feet more than the limit, though the city is considering increasing the limit in the area to 400 feet as part of its plan to promote transit-oriented development around a planned rail station about a quarter-mile from the tower site.
The tower’s approved density will allow about 525,000 square feet of floor space. That’s more than double the roughly 200,000 square feet permitted under zoning rules, and 33 percent more than the roughly 400,000 square feet proposed under the city’s draft transit-oriented development plan for projects that provide community benefits.
DPP said more community benefits beyond affordable housing should be delivered for such a significant density increase. The agency suggested the addition of more bicycle parking — space for about 300 bikes instead of 26 included in SamKoo’s plan — pedestrian access from Kapiolani Boulevard to Kona Street and dedicated car-share parking.
DPP also said the period for which the project’s condos must remain affordable should be longer.
Under the state’s affordable-housing law, Kapiolani Residence units would need to maintain the income and affordability restrictions for 10 years, during which time HHFDC can recoup a share of proceeds from any resales. DPP strongly advocated increasing the affordability period to 30 years.
Chun noted that it would be possible to increase bike parking if parking demand falls for cars and rises for bikes. He also said the added density is warranted given that SamKoo will produce affordable housing that goes significantly beyond what state law requires for such projects.
"The decision to create a predominantly affordable housing project with the ability to accommodate families as well as individuals at this very central location on a significant, high-value site both requires and merits the density and building envelope proposed," Chun wrote to DPP. "We believe that this project represents a significant civic contribution meriting the allowances and exemptions needed to achieve economic feasibility."
Under state law, developers can qualify for exemptions to non-safety-related zoning regulations as well as general excise tax payments for residential projects where at least 50 percent of units are made affordable for households earning no more than 140 percent of the median income.
SamKoo has committed to deliver 60 percent of units for households earning no more than 120 percent of median income. Most of the affordable units — 225 condos — will be for households earning no more than 100 percent of median income. Another 33 units will be for low-income residents earning no more than 80 percent of median income.
In terms of unit size, 107 of the affordable units will have one bedroom and 624 to 680 square feet of living space. Another 105 units will have two bedrooms and 841 to 916 square feet of space. The largest affordable units, of which there are 27, will have three bedrooms and 1,227 square feet of living space. There also will be 53 affordable studios with about 415 square feet of living space.
If SamKoo were held to the city’s standard density limit, the number of total units would fall by 188 to 297 from 485, the developer said.
Another exemption allows the tower to be built closer to some streets or property lines. For instance, a building setback area of 10 feet is required on the backside of the tower along Kona Street where a nine-story parking structure is planned. The exemption reduces this setback to 5 feet.
On the short sides of SamKoo’s property, the entire 10-foot setback area is eliminated.
The amount of parking in the tower is something else that received an exemption. Under zoning rules, 851 stalls are required. SamKoo’s plan has 701 stalls. However, DPP actually recommended that the number be reduced to 446 to be in line with the draft transit-oriented development plan.
